In the 14th annual Globe and Mail ranking of online brokers, this tiny, largely unknown independent firm, beat all the big bank-owned firms as well as six-time winner Qtrade Investor. Virtual Brokers was added to the ranking just two years ago, and it finished last back then.

2012 broker rankings

2012 broker rankings

2012 broker rankings

The firm’s rise to the top was built on total low-cost domination. An investor who buys or sells stocks can pay as little as 99 cents per order and, new for this year, commissions to buy any and all ETFs have been waived. Virtual also offers U.S.-dollar registered accounts, a uniquely user-friendly website and small but useful features like a preferred share screener and a portfolio X-ray tool for ensuring your holdings are well diversified.

Qtrade’s long run atop this ranking has ended, but by the smallest of margins. This independent broker continues to offer a mix of low costs and first-rate resources for clients. The next tier of brokers is represented by BMO InvestorLine, which did something truly innovative this year and introduced an option for clients to receive advice on portfolio building, and Scotia iTrade, which ranks well despite having raised some costs in the past year.

As always, this ranking was done from the point of view of mainstream investors. That means all types of registered accounts must be available as well as a wide variety of investments and the research, planning and screening tools to make smart investment choices.

--------------------------------------

Here's how they were ranked:

Cost

Brokers who score well in this category maintain a low hurdle for clients to qualify for sub-$10 stock trades. Commissions on bonds and mutual funds are also considered, as are administration fees for registered accounts and the availability of commission-free ETF investing.

Account Information

This category has been given an increased emphasis in the past few rankings because it’s vitally important for clients to have a clear picture of how their entire account is performing, rather than seeing only whether individual securities are up or down.

Trading

Brokers are graded here on their webpage for trading stocks, bonds and funds; on the range of investment products clients can buy online; and the availability of registered accounts that can hold U.S. dollars (many brokers force a conversion into Canadian dollars when clients sell U.S. stocks or receive dividends from such stocks).

Tools

This category covers the variety and exclusivity of a broker’s research, financial planning and stock/ETF/mutual fund screening tools. Having a useful ETF centre is a plus, as are well-located explanatory videos that easy to find as you go about your research and trading.

Innovation

Which firms are leaders in terms of cutting prices and introducing new services, and which are followers?

--------------------------------------

Find detailed results for each of these categories in the table at the bottom of this article.

Comment: These guys are nimble, fresh thinkers who don’t play follow the leader. They aim to be the leader, and they’re succeeding by emphasizing low costs and by developing a Web interface for trading and researching stocks that may be the best out there for the mainstream investor. VB’s latest price challenge to other brokers is to waive its already small purchase commission on ETFs (you will pay to sell). With If they had? more analyst research and proper account reporting, these guys might be unstoppable in this ranking. In the marketplace, their biggest challenge is landing customers. Can you trust a micro firm like Virtual? The fact that the firm is a member of the Canadian Investor Protection Fund (covers portfolios worth up to $1-million in case a broker fails), and the Investment Industry Regulatory Organization of Canada says yes.

Comment: Qtrade is so thorough in borrowing the best features of its competitors that it has even added a taste of Virtual Brokers’ cool website interface. The result for clients is a firm that offers the best of almost everything, including reasonable trading costs, detailed account performance reports and research tools. Note: Qtrade charges electronic communications network (ECN) fees for some Canadian market trades in addition to regular commissions. Readers have complained repeatedly about this over the years.

Comments: Never out of contention in this ranking, InvestorLine did something totally off the grid this year by offering clients the option of getting advice on building and maintaining a portfolio. InvestorLine’s adviceDirect service costs a rather stiff 1 per cent of assets in an account, but it represents some novel thinking in how to set up clients to invest effectively and, of course, generate revenue for the firm. For now, having an advice option is worth minimal points for a broker in this ranking. We’ll bump that up next year if adviceDirect proves popular.

Comment: The website’s been spiffed up enormously, a few ETFs have been added to the commission-free list and the selection of research tools, already quite good, has been improved. But the cost-cutting DNA from this firm’s origins as maverick broker E*Trade Canada has gone missing. Not too long ago, iTrade slapped a $100 annual administration fee on RRSP accounts with assets of less than $25,000, and it raised the minimum stock trading commission for people with assets under $50,000 to $24.99 from $19.99. Small moves, but telling.

Comments: A good overall firm that for some reason dabbles in pointless nickel and diming every so often. It happened several years ago when online trading commissions were temporarily bumped up to an industry high of $29.95, and it’s happening again now with a decision not to sell mutual funds from blue-chip companies like Mawer that don’t pay commissions to sellers. Otherwise, this firm stands out for offering three notable things – U.S.-dollar registered plans, excellent account performance reporting and a well-stocked toolbox that is set to add “The Community,” an online forum where clients can benchmark their accounts against other investors and share ideas.

Comments:There’s good news for clients of the country’s biggest online brokerage firm. One, U.S.-dollar registered accounts are finally coming in the next 12 months. Two, TD just introduced a much-improved online presentation of what securities are in your account and how they’re doing. Alas, there’s no word on when we can expect a proper of accounting of how your entire portfolio is performing on a year-by-year basis, a serious deficiency for a firm of TD’s reputation and calibre. For TD at its best, check out the research centre. It’s massive, comprehensive and really well-designed.

Comments: Credential’s mid-pack status is secured mainly by the fact that it does good work in helping clients keep track of how their accounts are performing. Otherwise, it’s generally adequate but not outstanding in any way. Oh, wait. The stock-trading commission schedule is outstandingly uncompetitive. There’s no reason why investors with assets of $50,000+ should pay $19 or potentially much more to trade stocks when most everyone else charges a flat $10 or so.

Comments: It’s tempting to direct investors who are primarily interested in active stock trading to Questrade because of its versatile trading platforms and $4.95 minimum commissions, and because there’s not a lot of stock, fund and ETF research for people who want to buy and hold. But Questrade also happens to be the firm with the cleanest account fee schedule for both large and small registered accounts. Nobody pays anything in the way of annual admin fees. Questrade also offers U.S.-dollar RRSPs.

Comments: Far from the best in any category, but you have to be impressed by the fact that Disnat keeps taking top spot in the annual online brokerage customer satisfaction survey run by J.D. Power and Associates.

Comments: No bank ignores its online brokerage arm like CIBC. Every time it looks like the lights are on at Investor’s Edge, they get snapped off again. Example: A super-cheap stock-trading commission of $6.95 was made available a few years ago for people with at least $100,000 in total business with CIBC. Since then, there hasn’t been much to get excited about. A project to introduce U.S.-dollar registered accounts is underway at Investor’s Edge, and personalized account reporting has been identified as a “future enhancement.” Future customers will be pleased.

Comments: Like many of the firms included here, NBDB has added research from the independent analysis firm Morningstar. That’s a plus, as is NBDB’s account performance reporting tools. Other than that, a routine offering.

Editor's Note: An earlier version of these rankings incorrectly flipped HSBC InvestDirect and National Bank Direct Brokerage's positions. This version has been corrected.

Restrictions

All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. Thomson Reuters is not liable for any errors or delays in Thomson Reuters content, or for any actions taken in reliance on such content. ‘Thomson Reuters’ and the Thomson Reuters logo are trademarks of Thomson Reuters and its affiliated companies.